Outlook: ITV hares off down wrong road in search for new chairman

Murdoch's will

The board in waiting at ITV promises to name a non-executive chairman early in the new year. In the meantime, Sir Brian Pitman, deputy chairman of Carlton, will fill the post on an interim basis. This presumably means that John Nelson, one of the City's foremost corporate financiers and the early front runner for the job, has already been rejected. He's not seen as independent enough, as he once took fees from Granada, a fact that makes him doubly unacceptable to Carlton.

Denise Kingsmill, who has just stepped down as deputy chairman of the Competition Commission, has let it be known that her telephone lines are open, but it may be a long wait. Sir Howard Davies, former chairman of the Financial Services Authority, is dismissed as equally inappropriate by one City grandee. But if not them, then who? Sir Christopher Gent, former chief executive of Vodafone, would be a shoo-in for the job if he wanted it, but I'm not wholly convinced that he would be entirely appropriate either.

The truth is that the City has got itself into a terrible mess over the leadership of ITV. When Anthony Bolton of Fidelity led the City revolt against Michael Green, he did so, not on the basis that Mr Green had cost him a barrow load of money (which was actually the real reason), but on the Higgsian correct principle that the new company needed an independent, non-executive chairman to lead it, not a volatile primadonna with years of Carlton baggage to weigh him down.

A related reason was the obvious antagonism between Mr Green and Charles Allen, chief executive of Granada, which it was thought might endanger the merger. This would seem to imply that the new chairman must not only be independent but also be totally unconnected with the industry. This doesn't seem the right approach to me at all. It certainly hasn't worked with Don Cruickshank at SMG.

What ITV needs right now is a single-minded executive chairman, capable of driving through the requisite degree of change and giving the broadcaster the new sense of direction it so desperately needs - a Tony Ball, former chief executive of BSkyB, or a Sir Howard Stringer, chief operating officer of Sony Entertainment.

Even if other commitments and obligations allowed, it seems unlikely that either of these two would be tempted just for the position of chief executive. To attract such high-calibre talent requires more. They have to know it would be entirely their show, and that any success they achieved would reflect wholly on them.

Meanwhile, Mr Green is trying to put as brave a face on his demise as he reasonably can. He genuinely wants to see the merger go through, despite the shabby way in which he has been treated by the City, and he wouldn't do anything to stand in its way. Yet behind the scenes he is already busy plotting his revenge. Rightly or wrongly, it's Charles Allen he blames for his downfall. What he hates about it most of all, is not so much losing his job, as being outsmarted by his old adversary. In the circumstances, even the most detached of personalities would struggle to maintain their temper and reason, given what's just occurred, and Mr Green is a lot more hot headed than most. Yet he would do well to remember the Sicilian proverb - revenge is a dish best served cold.

Murdoch's will

I've been taken to task privately by one of Sky's leading institutional shareholders for supporting the appointment of James Murdoch as chief executive at BSkyB. This is not the sort of editorial line The Independent should be taking, I am told. Rather we should be standing up for the highest possible standards of corporate governance, which this appointment falls a long way short of.

No doubt I deserve my ticking off, but actually the point I've been trying to make is that whether or not James deserves to get the job, there's not a lot shareholders can do about it. BSkyB is, in effect, run and controlled by Rupert Murdoch, and so long as that remains the case, he's always going to get his way. Furthermore, to kick against his will is likely to do more harm than good by creating a divided board and an operationally damaging battle for control. Much better to hem the father-and-son team around with checks and safeguards than try to prevent it altogether.

Where my complainant has got a point is in warning against the dangers of too great a concentration of power in Murdoch hands. Through News Corp, the Murdochs own 35.4 per cent of BSkyB shares. It could be argued that as the largest shareholder they have the best possible incentive to maximise value for all. Unfortunately, it is not as simple as that. No one is suggesting that with a compliant son in the chief executive's seat, Mr Murdoch might attempt to syphon off the company's money, in the way Robert Maxwell did. Whatever else Mr Murdoch is, he's not a crook.

Rather, the fear is that Sky will be used recklessly to service Mr Murdoch's wider agenda and business ambitions. For Mr Murdoch, shareholder value is only a means to an end. He's much more driven by power, influence, and a place in history than money per se, which is, paradoxically, what makes him such a remarkable businessman.

For Mr Murdoch, the priority is trouncing the competition, sometimes at almost any cost. This leads him to think laterally and take extreme risks. What outside shareholders in Sky are understandably nervous about is that their capital becomes Mr Murdoch's main gambling chip. For instance, particularly high risk assets might get allocated to Sky rather than elsewhere in the empire. Alternatively, Sky could be deprived of the best business opportunities, which would be placed in other parts of the empire. The potential for conflict of interest is obvious.

Yet as it happens, the record argues to the contrary. To date, the flow of benefit has tended to be almost wholly one way - from News Corp to Sky, not the other way round. For instance, News Corp's commanding position in Britain's national newspaper market was ruthlessly used to promote Sky in its growth years, at some risk to the editorial credibility of the titles. Outside shareholders have on the whole benefited from the News Corp connection, not been disadvantaged by it. That doesn't mean that Mr Murdoch won't at some stage attempt to reverse the flow. It will be up to the board and its officers to ensure he doesn't.

Mr Murdoch is not big on consultation. His plans for Sky tend to get presented to the board more in the nature of directives or fait accompli than matters for discussion. This has been the case on most of the big decisions in Sky's history, including the satellite dish giveaway, the free set-top box initiative, and the decision to replace Mark Booth with Tony Ball as chief executive.

The final parting of the ways with Tony Ball came after Mr Murdoch began to push for a step change in subscriber growth ambitions, even if that means sacrificing the group's targets for average revenue per user. Just as the company becomes profitable once more, Mr Murdoch senior seems only intent on betting the ranch all over again. Is Sky for ever to remain a jam tomorrow company?

Ironically, the row concerning James Murdoch's appointment may ensure that it does not. The Murdochs (senior and junior), the City, the board, the company, Uncle Tom Cobleigh and all are now on a state of such high alert to anything that might disadvantage outside shareholders that there cannot help but be improvement in standards of diligence and corporate governance. Already James Murdoch has promised a resumption of dividends. He's also reassured shareholders that there are no plans for any high risk acquisitions. Still. You've got to hand it to the old man. He's got his way again, as he always does.

jeremy.warner@independent.co.uk